Online Extra: How to Play with the Big Guys

The best way to avoid trouble when teaming with a large corporation is to set the rules before going in. Here are a some pointers

September 10, 2001, 12:00 AM EDT

When a major corporation wants to back you in a venture or dangles the prospect of a big contract, it's easy to let enthusiasm trump your better judgment. It's natural to assume that a blue-chip outfit would never breach the agreement you struck or do anything illegal -- and most of them don't. However, the line between business hardball and illegal beanball can be so faint that it's often impossible to discern until it's too late, warns San Francisco litigator Jean Batman, chair of the American Bar Assn.'s Small Business Subcommittee. Being shortsighted is good for your lawyer's business -- not yours. So, the best advice is to take protective steps to avoid problems -- and costly, exhausting litigation -- down the road. Here's what the experts suggest:

-- Check out your partner's financials and track record with other vendors or joint-venture partners. Excessive problems or lawsuits could be a red flag. So are financial difficulties or shareholder pressures to improve performance. That's when a success-at-any-cost mentality can take over and prompt unethical behavior, says Laura Hartman, a professor of business ethics at Depaul University in Chicago.

-- Never share proprietary information without having a nondisclosure agreement in place, advises Chicago intellectual property lawyer, Raymond Niro Sr. Make sure you have obtained all the necessary patents, trademarks, and copyrights before meeting with the prospective customer or partner. Proof of ownership will give you an edge if a legal dispute arises later on.

-- Get to know the managers you're going to be working with and be alert to the possibility of corporate mergers, which could result in management changes and new priorities, counsels Fairfield, (Conn.)-based small-business lawyer Cliff Ennico. Try to find out whether top management is truly committed to your project or product.

The most important business stories of the day.

Get Bloomberg's daily newsletter.

-- Consider your contract's dispute resolution clause carefully. Although arbitration is quicker and cheaper -- and often preferred by big corporate partners -- there's a downside for the entrepreneur. If you seek redress for truly outrageous conduct, a jury will likely be far more generous than the arbitrator. Remember, however, "There is a direct relationship between the size of the verdict you are seeking and the delay tactics that will be employed by the opposition," counsels Cleveland lawyer Randy J. Hart.